Setting up a Company in India

Wholly owned Subsidiary:

Foreign companies can set up wholly owned subsidiaries in sectors where 100 percent foreign direct investment is permitted under India's national FDI policy. For registration and incorporation, a set of applications have to be filed with Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.

Foreign investment in India is regulated under the Foreign Exchange Management Act (1999) and is allowed under two routes, namely the "automatic route" and the "approval route." As per notifications issued by the Reserve Bank of India, 100% foreign investment is allowed in sectors covered under the automatic route. For other industries and sectors, caps are defined and government approval is required which involves a separate set of procedures to be followed.

Liaison office:

With effect from February 1, 2010, foreign companies/entities that wish to set up of Liaison Office / Branch Office in India are required to submit their application in Form FNC along with the documents mentioned therein to Foreign Investment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai, through an Authorised Dealer bank.

A liaison office is not allowed to earn income, undertake any industrial, trading or commercial activity, or enter into any agreement on behalf of the head office of the company.

The net worth of the foreign company should not be less than USD 50,000 or its equivalent. Also, it should be able to show a profit making track record during the immediately preceding three financial years in the home country.

Permitted activities

  • Represent the parent/group companies in India
  • Promote exports and imports from/to India
  • Promote technical / financial collaborations between parent/group companies and companies in India
  • Act as a communication channel between parent/group companies and companies in India.

Branch office:

Permission to set up a branch office in India is granted by the Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai.

To grant permission for setting up a branch office in India, the Reserve Bank of India takes into consideration the track record of the applicant company, existing trade relations with India, the activity of the company proposing to set up office in India as well as its financial position.

Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank.

Permitted activities

Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.

  • Export or import of goods
  • Render professional or consultancy services
  • Carryout research work in areas in which the parent company is engaged
  • Promote technical or financial collaborations between Indian companies and parent or overseas group company
  • Represent the parent company in India and acting as buying / selling agent in India
  • Render IT services and technical support for the development of software in India
  • Foreign airline/shipping company

Project office:

The permission to set up a project office in India is granted by The Reserve Bank of India. To be eligible for setting up a project office, the applicant company should have secured a contract from an Indian company to execute a project in the country. Also, the project should be funded directly by inward remittance from abroad; by a bilateral or multilateral International Financing Agency; or cleared by an appropriate authority.